How private lending works in Australia: a borrower’s guide

Private lending is the part of the Australian credit market that sits outside the banks: capital from specialist non-bank lenders, mortgage funds and private investors, lent against real property to businesses that need speed, flexibility or a structure a bank will not write. It is not new — solicitors' mortgage funds and private mortgages predate the big four — but it has grown sharply as bank credit policy has tightened. This guide explains how it works from the borrower's side: who the lenders are, what they assess, what it costs, who it suits, and where a broker fits.

Who the lenders actually are

• —Specialist non-bank commercial lenders. Institutions whose whole business is property-secured business lending. They have credit teams, panel valuers and standard documents, and they write first mortgages, second mortgages and construction facilities every day.
• —Mortgage funds and private credit funds. Pooled vehicles that raise money from wholesale and retail investors and deploy it into registered mortgages, typically with a defined mandate — first mortgages to a set LVR, or construction, or a particular loan size.
• —Private investors. Sophisticated individuals, family offices and syndicates lending their own money against a registered mortgage. Faster and more flexible than institutions, with appetite that varies deal by deal.

A broker with a panel across all three can place a deal where it fits. That matters more in private credit than in bank lending, because each funder's mandate is narrow and the same deal can be a strong yes at one and a no at the next.

What a private lender assesses

A bank starts with serviceability: can the borrower repay from income, and does the file prove it. A private lender starts with the security and the exit:

• —Security. What is the property, where is it, what is it worth on the lender's own valuation, and how quickly could it be sold.
• —Loan-to-value ratio. Typically up to around 75% gross on well-located residential investment or commercial property; lower on land, rural and specialised assets.
• —Purpose. The loan must be for a business or investment purpose, confirmed by a signed Business Purpose Declaration.
• —Exit. How the loan is repaid at the end of the term — sale, refinance or incoming funds — with evidence. See how lenders assess an exit.
• —The borrower. Credit history and conduct are reviewed, but they adjust pricing and LVR more often than they decide the outcome.

The products in the stack

• —First mortgage — the lender ranks first on title. Used for acquisitions, settlement bridges, refinances and equity release.
• —Second mortgage — ranks behind an existing lender with its consent. Used to raise capital without disturbing a bank first.
• —Construction finance — sized against the completed value, drawn progressively against quantity-surveyor certificates, with or without presales.
• —Renovation and flip finance — purchase plus a renovation budget for buy-improve-sell businesses.
• —Caveat loans, mezzanine debt and preferred equity also exist in the market. We do not arrange them; the glossary explains what they are.

Who it suits

Entity borrowers — Pty Ltd companies, corporate trustees, partnerships — with real property to secure against and a reason the bank is the wrong tool: a settlement date the bank cannot meet, a structure or asset outside bank policy, a tax debt or credit event on the file, a build without presales, or simply a short-term need where a bank's process is disproportionate. It does not suit individuals borrowing for personal purposes or against their own home; that is consumer credit and needs a licensed credit provider. See who we help.

How it is regulated

Credit to a company or other body corporate sits outside the National Credit Code under section 5(1), so the responsible-lending and licensing regime for consumer credit does not apply. That is what allows a private lender to assess a deal on its merits in days. It does not mean the market is unregulated: the loan is governed by contract and property law, lenders and brokers remain subject to the general law on misleading conduct and to AML/CTF obligations, and the Code's anti-avoidance provision in section 13(3) catches consumer loans dressed up as business loans. Our articles on section 5(1) and section 13(3) go deeper.

What it costs

More than a bank, in exchange for speed and flexibility. Pricing is set per deal by the funder — there is no rate card — and disclosed in the term sheet before any commitment. The drivers are the security, the LVR, first or second position, the term, the strength of the exit and the interest structure. Fees fall into predictable categories: brokerage, lender establishment or commitment fees, valuation, legal and registration costs. See what fees to expect and how pricing is set.

The timeline

• —Enquiry: entity, property, amount, purpose, exit. A read on fit within one business day.
• —Indicative terms from the chosen funder typically within 24–48 hours.
• —Conditional offer, valuation and legal review.
• —Documentation, Business Purpose Declaration, settlement via PEXA — typically 5–10 business days for a clean file.

The full sequence is on the process page.

Broker or direct?

Direct lenders market their own product. A broker with a panel sees the pricing and appetite of many funders at once and places the deal where it fits, negotiates the terms, manages the valuation and consent processes and keeps the file moving. The broker is paid a brokerage fee disclosed in the mandate before work starts. For a one-off, time-critical transaction with any complexity, that is usually the faster and cheaper route; for a developer with a standing relationship and a plain-vanilla facility, going direct can be fine.

Red flags

• —Upfront fees demanded before any term sheet, from a party you cannot verify.
• —“Guaranteed approval” or “no credit check” marketing.
• —Caveat-only security presented as equivalent to a registered mortgage.
• —A lender or broker who will not put the fees in writing before the mandate.
• —Encouragement to describe a personal purpose as a business one.

Next steps

If you have a property-secured business deal, the FAQ answers the common eligibility questions and the enquiry form takes about five minutes. We will tell you quickly whether the private market is the right place for it.